ITT unit prepares for independence

ITT, the $11 billion conglomerate, is about to shrink, and that is good news for Fairfax County.

ITT, based in White Plains, N.Y., was scheduled to spin off two company divisions as independent, publicly traded companies on Oct. 31. Current ITT stockholders were to be given shares in the new companies.

One of the spinoffs, Xylem, will deal with water products and be based in New York. The other, ITT Exelis, will have an impact on Northern Virginia, specifically on Fairfax County, where it will be based. The company will consist of ITT’s Defense and Information Solutions segment and will occupy the building in McLean where 60 of its employees are now housed.

The new company will have revenues of about $6 billion, enough to put it on the next Fortune 500 list. It will be headed by current ITT executive David F. Melcher and will focus on contracts with the U.S. military and federal agencies. The spinoff is expected to generate about $5 million in expenditures and eventually create another 60 jobs.

The split is the result of “an analysis of long-term financials,” says David J. Albritton, ITT’s vice president of communications. ITT manufactures a sweeping array of industrial products ranging from shock absorbers to smart bombs, so by reorganizing itself into three companies it will be able “to make more focused investments,” he says.

Stephen S. Fuller, who directs George Mason University’s Center for Regional Analysis, understands that logic. Different customers can require different staffing and corporate cultures, he explains. Investors seem to like the move: Announcement of the split was greeted with a 15 percent bump in ITT’s stock price, Albritton says.

The Department of Defense will remain a major client of Exelis, but it isn’t giving out contracts like it once did. Tighter budgeting, combined with former Defense Secretary Robert Gates’ mandate to “insource” some defense jobs, has hurt contractors. Many have become “skittish about expansion and relocations,” says Gerald L. Gordon, president and CEO of the Fairfax Economic Development Authority. Gordon should know: His county is the headquarters of more than 25 of the country’s 100 largest federal contractors.

Exelis, which will be located in Tysons Corner, is yet another feather for Fairfax’s already heavily plumed cap. “These guys could have gone anyplace,” Gordon says. Fairfax’s successful pitch was aided by a $100,000 grant from the Governor’s Opportunity Fund, which the county matched in infrastructure. “Richmond,” says Albritton, “was very supportive.”